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Long-Time Bear Sees One Economic Bright Spot: Jobs

Bernice Napach

Daily Ticker•April 23, 2013

David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates, has been a long-time bear on the U.S. economy. But now he has some good news for the U.S. labor market and the U.S. worker.

“Labor demand is actually on the rise and job openings on the part of the business sector is up more than 10% in the past year,” Rosenberg tells The Daily Ticker. “Even though hirings are anemic, the levels of firings…is at an all-time low.”

Another positive indicator, according to Rosenberg: the number of people voluntarily quitting their jobs—what he calls the “take this job and shove it index”—is up 7% over the past year, reaching a cycle high.

“For those that have the skills and are employed, things are getting better,” says Rosenberg. Average weekly pay and hours are rising, which is good news for workers paying down debt or making purchases or both. And, workers need those higher wages, says Rosenberg, because payroll taxes have risen for all workers and marginal tax rates for some.

Rosenberg says these data points on the U.S. labor market “could be a very important shift in terms of the national income pie moving away from the corporate sector toward the labor sector.”

But what’s good for the worker—and the consumer—isn’t necessarily good for business. Labor expenses are the primary cost for most businesses; high labor costs usually translate into smaller profit margins.

“Wall Street has done magnificently well without Main Street,” says Rosenberg, but now higher labor costs “could affect profit margins.”

Rosenberg is not a bull on the overall U.S. economy which he says has “no momentum” heading into the second quarter. “Fiscal policy is acting as a drag on the economy,” he says, citing sequester budget cuts, government regulation and the lack of a coherent fiscal policy.

All of these factors plus Fed policy are “forcing companies to hoard cash,” says Rosenberg.

On Friday the government releases its first report on second quarter GDP following a 0.4% growth in the first quarter—which was first reported as a 0.1% decline. Economists expect 2Q GDP near 3%, according to a recent Bloomberg survey.

The U.S. economy “will remain feeble for quite a long period of time” with annualized trend growth near 1.5%, according to Rosenberg.